Schwarzenegger's insurance surcharge has appearance of tax hike

Gov. Arnold Schwarzenegger was insistent at his January budget presentation that his spending plan does not raise taxes.

He said, "I refuse to raise taxes, because there are so many other areas where Sacramento can be smarter, more efficient and save precious taxpayer dollars."

But Schwarzenegger again proposed a 4.8 percent surcharge on all residential and commercial property insurance to help pay for the California Department of Forestry and Fire Protection. The Department of Finance estimates that the surcharge would cost about $48 per policyholder and relieve the general fund by $200 million through June 2011.

Property owners would begin paying the charge starting in January 2011. Most homeowners could not deduct it on their federal taxes because it would not be implemented as a property tax.

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"We consider it a fee," Schwarzenegger said. "I let some people debate over that – what's a fee and what's a tax. But I mean, I call it a fee."

Generally, where fees are imposed, there is a nexus between payer and fee. Fishing and hunting license fees generate money for the Department of Fish and Game to manage wildlife and fish hatcheries, for instance.

Cal Fire offers little benefit to homeowners in downtown Sacramento, but great assistance to those living in the Sierra Nevada or mountain areas of Los Angeles County. Under Schwarzenegger's plan, all of those homeowners would pay the same 4.8 percent surcharge on their insurance each year.

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